Foreign aid falls victim to surplus push

Treasurer Wayne Swan . . . ‘I’ll take my medicine, I’ll accept the politics of this are very uncomfortable. But getting the big economic decisions right, to support Australian jobs, is what people expect.’
Photo: Glenn Hunt

by
Phillip Coorey | Chief political correspondent

The federal government will delay for another year reaching its foreign aid spending target, a move that could save as much as $3 billion and help it forecast a surplus in 2016-17.

In a bid to placate aid groups, Tuesday’s budget will cap the amount of aid money that can be spent on onshore asylum seeker costs. This financial year, $375 million – about 7 per cent of the $5.2 billion annual aid budget – was hived off to help meet spiralling costs caused by the record influx of asylum seekers. This number will be confirmed as the cap in the budget.

And in rare new spending, the government will make a $300 million overture towards the unemployed and single mothers. This will fund three concessions after the government ignored calls, including from its own backbench, to increase the dole and reverse a $700 million saving from last year that forced single parents from the parenting payment on to the dole after their youngest turns six, if they are partnered, or eight if they are single. This was instead of the previous 16.

MPs in exposed areas such as western Sydney said the issue with single parents was further hurting their chances at the September 14 election.

AFR
AFR

The budget is expected to forecast a surplus in the last year of the forward estimates, 2016-17.

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“We’ll set out our plan to return to surplus, a pathway back to surplus,’’ Treasurer
Wayne Swan
said.

Deferring the foreign aid contribution will be a big part of this surplus forecast but will anger aid groups.

Under the United Nations millennium development goals, Australia agreed on a bipartisan basis to lift its ­foreign aid contribution to 0.5 per cent of gross national income by 2015-16.

Aid budget to grow at slower pace

In last year’s federal budget, the government deferred that date until 2016-17, saving $2.9 billion over the forward estimates.

The Australian Financial Review understands that Tuesday’s budget will defer the 0.5 per cent target by another year to 2017-18, delivering a similar four-year saving, including almost $1 billion in 2017-18, a year after the forecast surplus year.

The aid budget will still grow over the years, just by a slower rate. In 2013-14, the aid budget will increase $500 million from $5.2 billion to $5.7 billion, or 0.37 per cent of GNI.

Aid groups and the Greens, fearful of a repeat of last year, have been lobbying the government in recent weeks to leave the aid budget alone but the government will argue all areas have to take a hit in straitened times.

World Vision chief executive Tim Costello said that the deferral was “morally wrong and foolish".

He said the deferral was not a structural saving to the budget.

“We’ve already broken our promise once to the world’s poor," he said.

“The people who don’t get a vote but need this money are being sacrificed."

Mr Costello said the bulk of the world’s poor were in Asia and this decision was “curious" given the government’s focus on the region.

Bill Gates to press PM and Abbott for increase in aid budget

The decision will coincide with a visit to Canberra this month by Microsoft founder
Bill Gates
to press both Prime Minister
Julia Gillard
and Opposition Leader
Tony Abbott
to increase the aid budget.

Australia boasted of its aid commitment when it ran for and secured a spot on the United Nations Security Council in October.

The $300 million spend on welfare is designed to try to dampen the backlash caused by the cuts to parenting payments and an ongoing refusal to lift the dole by $50 a week, a move that would cost $5.6 billion.

Under the changes in the budget, welfare recipients, including those on parenting payments and the dole, will be able to earn $38 extra a fortnight – making it a total of $100 a fortnight – from extraneous sources before their benefits are pared back.

This increase to the so-called income-free area is the first in 10 years, will cost $258 million and 800,000 ­people will be eligible to benefit.

In a direct sop to single parents forced on to the dole, all will be eligible for the Pensioner Education Supplement of up to $62 a fortnight to help further their skills. This will cost $40 million and apply from January 1, 2014.

The 2000 single parents every year who will be forced on to the dole when their youngest turns eight will get to keep the pensioner concession card for another 12 weeks at a cost of $2.2 million. The card entitles holders to bulk billing, reduced out-of-hospital medical expenses and medicines listed on the pharmaceutical benefits scheme at the concessional rate.

Swan accepts political hit to come

The budget will be a far cry from last year’s document, which forecast a ­surplus this year of $1.5 billion and surpluses beyond.

A contrite Mr Swan accepted the government was going to be hit politically from this budget.

“I’ll take my medicine, I’ll accept the politics of this are very uncomfortable,’’ he said, blaming a $17 billion revenue write-down for the discrepancy and the decision to abandon the surplus target.

“But getting the big economic decisions right, to support Australian jobs, is what people expect of me, no matter how uncomfortable that is politically.

“Responsible governments have to respond to changed circumstances. You can’t sit here and pretend the global economy doesn’t change," he said.

The government may also meet opposition demands for the budget to detail the cost of the national disability insurance scheme beyond the forward estimates.